War in Ukraine hardening reinsurers’ approach warns broker

The ongoing impact of the Russian invasion of Ukraine has been a significant topic for debate at the annual reinsurance Rendezvous in Monaco this week with brokers saying that reinsurers are still taking a hard line over marine and energy risks involving the conflict area.

Broker Guy Carpenter has issued a new briefing on the global speciality market in time for the rendezvous with the marine and energy market remaining a tough market for insurers and their brokers.

The broker said the energy market faces continuing challenges from the Russia-Ukraine conflict, contending with a reduced premium level resulting from global sanctions.

It added: “Marine reinsurers have been consistent in excluding losses on land and limiting cover available for voyages and shipping risks within the conflict zone. Renewals for programs with war, terrorism and political violence exposures are likely to remain challenging.”

Guy Carpenter added there is likely to be increased demand for renewable products, alongside a continuing need for coverage of legacy fossil fuel assets through the energy transition.

James Summers, deputy CEO of Global Specialties and Global Head of Marine & Energy Specialty, said at the broker: “With an ongoing military conflict in Europe and the potential for an escalation in geopolitical tensions in other parts of the world, the marine market finds itself in uncharted territory as it assesses the current and future impact on vessel movements.”

Inflation also continues to affect market dynamics, as Nick Jay, deputy global head, Marine & Energy Specialty, explained. “

Inflation is still a significant factor for both insurers and reinsurers in the marine and energy markets,” he continued. “While insured values are customarily adjusted in line with rising inflation, the cost of repairs and potential time delays are both issues for the market. Inflation is also driving demand for more limit as values are reassessed.”

Summers added: “Guy Carpenter believes that the focus at renewals should be on what the client needs to buy, and negotiations should be transparent, data-led, and appropriate. Data continues to be key to understanding the original risk and finding alignment between insurers and reinsurers.”

The briefing  said the specialties reinsurance market globally is emerging from a turbulent time in its history with the January 1, 2023, renewals marking one of the most challenging placement periods in decades.

“A confluence of macro-economic factors and historical performance issues caused a step change in conditions across nearly every sector,” it added. “Since then, the waters have calmed slightly, and a greater sense of stability returned at the mid-year renewals, however, the market remains challenged.

“Firming rate pressures in key markets continue, capacity at the lower end of programs is limited, we have witnessed large shifts in the appetite of reinsurers for certain covers, while terms and conditions are tight.

James Boyce, CEO, Global Specialties, concluded: “In the current environment, preparation is key. The ability of clients to articulate their portfolio effectively and demonstrate the success of their underwriting strategy will be central to productive negotiations. Furthermore, having access to a broad mix of products and capital pools and being armed with comprehensive market data underpinning a well-defined renewal strategy will be crucial.”